Majority among gold miners see the precious metal to hit $2000 at some where next year,according to a PricewaterhouseCoopers survey.
LONDON(BullionStreet): Majority among gold miners see the precious metal to hit $2000 at some where next year,according to a PricewaterhouseCoopers survey.
The survey said miners are raising dividends and looking for takeover deals with expectations the price of gold will head even higher next year.
John Gravelle, the Canadian mining leader at PwC, says the shares of gold companies haven't increased as much as the price of gold, so they're facing increased competition for investors' dollars.
The gold miners are seeing dividends as a way to differentiate their stocks from other investments such as exchange-traded funds linked directly to the price of gold, Gravelle said.
"They're very aware that there are a number of options of what we can call paper gold that investors can invest in rather than buying shares of mining companies," Gravelle said of the gold miners.
"Some are getting creative and looking at linking their dividend to increases in the gold price, so therefore you are getting a bit of a very direct return based on increases in the gold price." The PwC survey found that 27 per cent of gold miners paid dividends in 2011, up from only nine per cent in 2010.
Barrick Gold Corp. (TSX:ABX) raised its quarterly dividend by 25 per cent to 15 cents U.S. per share earlier this year, up from 12 cents. The move followed by an announcement by Newmont Mining Corp. that it would increase its dividend by 17 per cent to 35 cents per share.
Goldcorp Inc. (TSX:G) boosted its monthly dividend earlier this month by 32 per cent to 4.5 cents from 3.4 cents thanks to its strong cash flow.
Gold has been trading for around US$1,600 per ounce in recent days after going as high as US$1,900 in September. The PwC survey found 80 per cent of gold miners expected the price to go higher in 2012 and a majority saw a peak at US$2,000 per ounce.
The same survey a year ago found 73 per cent of the miners predicted an increase in the price of gold with 24 per cent believing it would remain about the same. Forty per cent in 2010 believed gold would peak at around $1,500.
The 2011 survey found 29 per cent of the miners expect to spend cash on acquisitions in 2012, up from 19 per cent in 2011. "I think companies will be looking for acquisitions that are strategic and that are close to where they are," Gravelle said.
He pointed to Agnico-Eagle Mines Ltd.'s (TSX:AEM) deal for Grayd Resource Corp. (TSXV:GYD) as an example of the types of deals companies will be looking for.That acquisition beefed up Agnico-Eagle's existing operations in Mexico, a country in which it already has operations.
Gravelle said companies expanding geographically will need to do so carefully as governments are expected to be eyeing the price of gold too. "Everybody is expecting governments to try to get more out of it and it is important for the mining industry to really step up its game in talking with all its stakeholders," he said.